Ex-Valeant official accused of kickback scheme faces trial

FILE PHOTO: Former Philidor Chief Executive Officer Davenport and ex-senior Valeant director Tanner walk on the street with their lawyers after exiting the Manhattan Federal Court in New York

FILE PHOTO: Former Philidor Chief Executive Officer, Andrew Davenport (2nd-L) and ex-senior Valeant director Gary Tanner (C) walk on the street with their lawyers after exiting the Manhattan Federal Court in New York, U.S. February 23, 2017. REUTERS/Eduardo Munoz/File Photo

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By Brendan Pierson

NEW YORK (Reuters) - A former Valeant Pharmaceuticals International Inc executive and the former head of mail order pharmacy Philidor Rx Services will face trial Thursday on charges they orchestrated a multimillion-dollar kickback scheme, more than two years after Valeant drew scrutiny for its business practices.

Gary Tanner, formerly a senior director at Valeant, and Andrew Davenport, formerly chief executive officer of Philidor, have pleaded not guilty to charges including wire fraud and money laundering conspiracy. Prosecutors and the two men's lawyers are expected to make opening statements to jurors on Thursday morning.

Lawyers for Tanner and Davenport could not immediately be reached for comment.

Prosecutors have said Tanner and Davenport worked together in secret to steer business and funding from Valeant to Philidor. They said the scheme netted Davenport $40 million, $10 million of which was secretly kicked back to Tanner.

Founded in 2013, the now-defunct Philidor was a specialty mail-order pharmacy formed with Valeant’s assistance. At least 90 percent of the drugs it dispensed were Valeant-branded products, according to prosecutors.

Valeant was a victim of the scheme, which deprived the company of Tanner's "honest services," prosecutors said.

"Our company has cooperated with the authorities throughout the course of the investigation, and now, trial," said Valeant spokesman Lanie Keller. "Today, Valeant is focused on improving people's lives with our health care products."

The drugmaker's stock fell sharply in October 2015 after it disclosed it had been subpoenaed by U.S. prosecutors over various business practices. Later that month, a short selling firm published a report claiming Valeant hid its ties to Philidor and used the pharmacy to artificially inflate sales in order to drive up prices.

Valeant has denied wrongdoing related to Philidor.

In March 2017, billionaire investor William Ackman and his Pershing Square International Fund sold their stake of roughly 8 percent in Valeant at a $3 billion loss. Ackman had been engaged in a public effort to save the company for about 18 months.

(Reporting by Brendan Pierson in New York; Editing by Matthew Lewis)

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